Service tax on AC and first class rail fares from Oct.1

Service tax will be levied on high-end passenger classes, freight and auxiliary services rendered at railway stations from October 1.

The decision was taken on Wednesday at a meeting between Railway Minister C.P. Joshi and Finance Minister P. Chidambaram.

Fares of air-conditioned classes will go up by 3.708 per cent and that of first class by 7 per cent after permissible abatements.

Similarly, freight charges will go up by 3.708 per cent, while users of auxiliary services at stations will have to bear the burden of 12.36 per cent.

The railways had increased high-end passenger fares by about 30 per cent and that of freight too by a similar margin.

The revenue accruing to the exchequer from these service taxes has been estimated at Rs. 3100 crore annually.

The decision is being viewed as the first step towards the integration of the railways with the proposed goods and service tax regime.

Through another decision, the railways decided to levy a busy season and busy route surcharge on freight that varies from commodity to commodity up to a maximum of 10 per cent effective from October 1.

The railways hope to mop up an additional Rs. 826 crore in the next six months.